While profits are up year on year, costs have squeezed Unilever Nigeria operating margins for the nine months ended September 2024.

About the firm

Lever Brothers (West Africa) Ltd began trading soap in Nigeria in 1923. The company later started to sell food and laundry products, introducing Omo in 1960 and opening a production facility to manufacture the popular laundry brand locally in 1964.

In 1982 Lever Brothers opened a factory in Agbara, which still operates today, and the business changed its name to Unilever Nigeria plc in 2001.

Unilever Nigeria Plc is principally involved in the manufacture and marketing of Food, Beauty and personal care products. It has manufacturing sites inOregun, Lagos State and Agbara, Ogun State.

Q3 2024 numbers

There was an increase in both topline and bottom line. Topline means revenue. Revenue went up from ₦25.8 billion in 2023 to ₦39.9 billion in 2024.Profit after tax for 9M 2024 was ₦6.5 billion as against a ₦1 billion loss recorded in the same period in 2023. The loss was due to a loss in discontinued operations.

On the 17th of March 2023, the firm announced its intention to exit the Home care business categories in Nigeria. It exited the homecare business category in September 2023. All production of Home Care products ceased in June 2023 and sales ceased in September 2023. The assets were leased out to a 3rd party.

9M 2024 numbers

9M means nine months. In this case, the 9 months running from January to September 2024. Revenue moved from ₦71 billion in 2023 to ₦103 billion in 2024. Profit for the period moved up more than 6X from ₦1.6 billion in 2023 to ₦11 billion in 2024.

Revenue breakdown

Revenue is divided into three segments

Food products segment made ₦61.4 billion.

Personal care segment made ₦34.6 billion.

Beauty and Wellbeing made ₦7.7 billion.

Operating profit breakdown

Food products operating profit went up more than 5X year on year. From ₦914 million in 2923 to ₦5.5 billion in 2024.

Personal care and beauty wellbeing had year on year declines in operating profit.

For personal care operating profit dropped from ₦5.8 billion in 2023 to ₦3.3 billion in 2024.

Beauty and Wellbeing operating profit dipped from ₦1.1 billion in 2023 to ₦758 million in 2024.

Operating margins squeezed

As a whole operating profit margin dipped year on year.

In 9M 2023, for every ₦100 in revenue made, ₦11.1 was operating profit. For every ₦100 in revenue made in 9M 2024, ₦9.7 was operating profit.

The pressure points

Marketing and administrative expenses went up by 144% year on year. From ₦10.4 billion in 2023 to ₦25.5 billion in 2024. The jump is partly due to higher brand and marketing expenses and higher costs due to the Naira devaluation.

Time to aggressively write off receivables

For 9M 2024, management impaired ₦1.3 billion in trade receivables. That leaves ₦6.9 billion in receivables.

Trade receivables is money a business is owed following the sales of goods or services on credit.

Management needs to bite the bullet and write down most of the receivables.

Could we see a ₦1 dividend?

Management paid a 75 Kobo dividend from the ₦1.47 in earnings it made in the 2023 financial year.

9M 2024 earnings came in at ₦1.92. A 50% payout ratio would be at least ₦1 Naira.